ISLAMABAD : August 22, 2024: Anomalous tax regime has posed serious threat to very survival of the polypropylene industry in Pakistan. In a letter addressed to Finance minister, Mohammad Aurangzeb, the Pakistan Polypropylene Woven Sack Manufacturers Association (PPWSMA) chairman , Sikander A Khan, has counted a number of tax anomalies which, he noted, have put the polypropylene industry’s survival at risk and in sheer contract to the government’S declared policy provided a blanket exemption-laden regime to the commercial importers. Mr Sikander A Khan said the polypropylene industry draws your kind attention towards the discriminatory withholding tax regime applied on the Polypropylene Industry compared with the Commercial importers of Polypropylene Granules, a Polypropylene Industry specific raw material and document the following: –
1. The polypropylene industry, being import oriented, suffers heavy taxation due to anomalous tax structure. It pays income tax at the rate of 2% u/s 148 of Income Tax Ordinance 2001 and income tax @ 5.5% on the import of polypropylene raw material, spare parts and machinery. Contrary to this, the commercial importers, enjoy facility of minimum tax regime u/s 148(7) of the Ordinance.
2. The industry is being treated unfairly and faces multiple withholding tax regimes, including tax u/s
235 on electricity consumption, resulting in huge piling of Income tax refunds every year. This results in the bank borrowing at high rates to carryout industrial operations. Beside this, as a result of recent budgetary amendments in Section 153 (4), wherein full tax exemption have been restricted to 80%, the industry is now facing another challenge of increase in 1% withholding tax and piling of tax refunds.
According to PPWSMA chairman , contrary to the above treatment to the Polypropylene Industry, the Commercial importers of polypropylene raw material enjoy blanket withholding tax exemption u/s 153(5)(a), with reduced rate of 3.5%. This opens the flood gates for tax evasion as most of the customers of the Commercial Importers are tax evading, Polypropylene Industry. Beside this, the commercial importers indulge in flying invoices that is the main lifeline of unregistered/tax evading polypropylene manufacturers that causes huge damage to the national exchequer.
In order to eradicate the anomalous withholding tax structure, it is proposed that the industry be given similar blanket exemption from withholding tax u/s 153(1)(a) of the Ordinance at parallel with the Commercial Importers by incorporating “Plastic Industry” in Section 153(5)(a) and under clause 47A Part IV of Second Schedule. Mr Sikander A Khan said “We (The polypropylene industry) request for application of tax laws with the same yardstick between the Polypropylene Industry and Commercial importers to eradicate tax evasion.
